888 Holdings Is in Preliminary Talks to Buy William Hill for $4 Billion

Monday, July 25th, 2016 | Written by April Bergman
888 Holdings Is in Preliminary Talks to Buy William Hill for $4 Billion

888 Holdings and Rank Holdings are in preliminary talks to acquire the UK-based bookmaker, William Hill, in a $4 billion buyout. 888 is the owner of 888casino, 888poker, 888sports, and 93 other online gaming sites. It is one of the large online gambling companies in the world, with operations in the New Jersey, Delaware, and Nevada gaming markets in the United States.

Ironically, William Hill attempted a $1.1 billion takeover of 888 last year. The Gibraltar-based bookmaker last week had its CEO, James Henderson, resign after a turbulent 2-year run at the helm. William Hill maintains a large offline and online gaming network, but its online operations have been hampered in recent months by strategic errors.

Market Consolidation

2015 was considered a year of market consolidation in the online gambling industry. In July 2015, Ladbrokes took over Gala-Coral in a £2.3 billion deal. Betfair and Paddy Power had a massive £6 billion merger in August. Then in December 2015, GVC Holdings bought Bwin.Party for $1.7 billion.

That series of mergers and takeovers followed a pattern set in 2014, capping an 20-month period that saw the biggest consolidation in the past 10 years. In 2014, Amaya Gaming Group bought Rational Media, which owned PokerStars and Full Tilt Poker, for $4.9 billion. Early that year, the US lottery vendor, Scientific Games, bought slots manufacturer Bally Technologies for $5.1 billion. That move was a counter to Italian lottery giant GTECH’s $4.9 billion buyout of the world’s largest slots manufacturers, IGT.

Point-of-Consumption Tax

The various acquisitions are thought to have stemmed from the 15% Point-of-Consumption tax imposed on gaming companies by the UK Parliament. Despite the diversification and globalization of online gambling in the past few years, many UK gaming companies relied upon a steady core of UK gamblers for their business. Some found themselves less well-positioned to deal with a smaller profit margin than others. Inevitably, those companies became targets for mergers or acquisitions.

Offline operators like William Hill are having particular trouble. One might look at the gaming revenues since 2010 and think the UK gambling industry is healthy. The gaming revenues increased from £5.6 billion in 2010 to £7.1 billion in 2014. Most of that growth has been online, especially in the mobile gaming divisions of companies.

Duties on Gaming Machines

Meanwhile, land-based operators faced stouter regulations and stiffer gaming machine duties than before. A maximum betting tariff of £50 has been a trouble spot for land-based operators, because it caps their ability to take advantage of high rollers and high-volume problem gamblers.

What is considered a major step forward for society in general is a disaster for traditional land-based gaming operations, which get the bulk of their money from street-corner betting shops — and gaming machines in particular.

Nick Batram, an analyst at the brokerage Peel Hunt, spoke to BBC News about the dilemma.

Batram said, “You have new restrictions placed on people who want to stake more than £50 a spin on machines. Furthermore, machine gaming duties now stand at up to 25%. And buying land-based assets is quite expensive anyway, because you have bricks and mortar.

Caesars Interactive Up for Sale

Meanwhile, Caesars Entertainment is in talks to sell its online division, Caesars Interactive, to Giant Interactive Group (GIG), which develops and operates games in China. Giant Interactive is best known for its blockbuster MMORPG, MMO Games’s ZT Online 2, which is said to be popular among players in 2nd and 3rd tier Chinese cities (not one of the Big Four: Beijing, Shangai, Guangzhou, and Shenzhen).

The deal, which would not include CIE’s World Series of Poker, is rumored to be worth $4 billion. Caesars Entertainment is beset with $23 billion in debt. Its operations division, CEOC, is locked in a bitter bankruptcy lawsuit with its junior creditors. The courtroom battle is holding up a much-needed reorganization for Caesars Entertainment, as CEOC holds $18 billion of the debt. The sell of Caesars Interactive would presumably give Caesars cash to maintain operations and buy some of its debt.

Update on William Hill, 888, Rank Holdings

News that William Hill might be purchased by a combination of 888 and Rank Holdings sent the bookmaker’s stock soaring up 11%. Despite that optimism, William Hill appears displeased by the takeover discussions and appears as if it is going to resist such a move.

Though the company admitted there had been preliminary discussions with Rank Holdings and an online gaming company, The Irish Times described William Hill’s response as ‘frosty’.

The company released a statement late Monday which said, “It is not clear that a combination of William Hill with 888 and Rank will enhance William Hill’s strategic positioning or deliver superior value to William Hill’s strategy.